Second Quarter Highlights:
- Revenue of $101.3 million, up 2.3% year-over-year
- Loss from continuing operations of $(2.6) million; as adjusted income from continuing operations of $6.4 million
- Loss per share from continuing operations of $(0.07); as adjusted earnings per share from continuing operations of $0.17
- Debt leverage at 3.01 times as adjusted LTM EBITDA
WARSAW, Ind., Aug. 4, 2014 (GLOBE NEWSWIRE) -- Symmetry Medical Inc. (NYSE:SMA), a leading global source of innovative medical device solutions, including surgical instruments, orthopedic implants, and sterilization cases and trays, announced second quarter 2014 financial results for the period ended June 28, 2014. The Clamonta Ltd. subsidiary business, which was sold on May 22, 2014, is reported in discontinued operations.
| Second Quarter | Vs Prior Quarter | |||||
| (in millions, except per share data) | 2014 | 2013 | Change | 2Q'14 | 1Q'14 | Change |
| Revenue | $ 101.3 | $ 99.0 | 2% | $ 101.3 | $ 96.9 | 5% |
| Operating income (loss) | (2.6) | 7.1 | -137% | (2.6) | 5.0 | -152% |
| Income (loss) from continuing operations | (2.6) | 1.5 | -273% | (2.6) | 1.4 | -286% |
| EPS from continuing operations | $ (0.07) | $ 0.04 | -275% | $ (0.07) | $ 0.04 | -275% |
| As Adjusted Non-GAAP* | ||||||
| Operating income* | $ 11.9 | $ 10.0 | 19% | $ 11.9 | $ 7.6 | 57% |
| Income from continuing operations** | 6.4 | 3.8 | 68% | 6.4 | 3.4 | 88% |
| EPS from continuing operations** | $ 0.17 | $ 0.10 | 70% | $ 0.17 | $ 0.09 | 89% |
| * Operating income excludes charges for amortization of intangible assets, stock compensation expense, transaction related costs, asset impairment charges, facility closure and severance, product recall costs and net gain on insurance proceeds received. See “As Adjusted Financial Measures” below. | ||||||
| ** Income from continuing operations represents Operating Income excluding unrealized foreign currency impact on an intercompany debt, amortization of debt issuance costs and loss on debt extinguishment. See “As Adjusted Financial Measures” below. | ||||||
| (in millions) | Second Quarter | Vs Prior Quarter | ||||
| Revenue by Product: by Segment | 2014 | 2013 | Change | 2Q'14 | 1Q'14 | Change |
| OEM Solutions Revenue | ||||||
| Instruments | $ 29.8 | $ 28.1 | 6% | $ 29.8 | $ 28.9 | 3% |
| Implants | 29.4 | 28.1 | 5% | 29.4 | 28.4 | 4% |
| Cases | 17.3 | 17.1 | 1% | 17.3 | 15.7 | 10% |
| Other | 4.4 | 3.4 | 29% | 4.4 | 3.2 | 38% |
| Total OEM Solutions Revenue | $ 80.9 | $ 76.7 | 5% | $ 80.9 | $ 76.2 | 6% |
| Symmetry Surgical Revenue | 20.4 | 22.3 | -9% | 20.4 | 20.7 | -1% |
| Total Revenue | $ 101.3 | $ 99.0 | 2% | $ 101.3 | $ 96.9 | 5% |
Revenue for the second quarter 2014 was $101.3 million, up 2.3% compared to $99.0 million in the same period last year. The current quarter revenue was primarily driven by higher sales in the Company’s OEM Solutions segment, partially offset by a decrease in the Symmetry Surgical segment.
OEM Solutions segment revenue was $80.9 million in the second quarter 2014, a 5.5% increase from $76.7 million in the second quarter 2013. The increase was driven by higher revenue in all OEM segments. Second quarter 2014 OEM Solutions segment revenue included a benefit of $1.4 million, or 1.9%, due to the favorable impact of foreign currency exchange rates. On a sequential basis, second quarter 2014 OEM Solutions revenue was up 6.1% compared to the first quarter 2014, reflecting higher sales in all OEM segments. Overall, the OEM Solutions segment continues to experience steady end market demand with procedural growth consistent with Company guidance assumptions.
Symmetry Surgical segment revenue was $20.4 million in the second quarter 2014, an 8.7% decrease from $22.3 million in the second quarter 2013, or a 4.9% decrease neutralized for the loss of distribution rights for the alliance New Wave product line. First quarter 2014 Symmetry Surgical segment revenue included a benefit of $0.1 million, or 0.4%, due to the favorable impact of foreign currency exchange rates. On a sequential basis, second quarter 2014 Symmetry Surgical segment revenue was down 1.3% compared to the first quarter 2014, but increased 4.5% sequentially neutralized for the loss of distribution rights for the alliance New Wave product line. For the second quarter 2014, Symmetry Surgical encountered a continued sluggish hospital spending environment.
Earlier today, Symmetry Medical announced that it has entered a definitive agreement to sell its OEM Solutions business and concurrently transfer to Symmetry Medical, Inc.'s shareholders ownership in a new company holding its Symmetry Surgical business.
Gross profit for the second quarter 2014 was $28.2 million, compared to $26.6 million in the same period last year. Gross margin percentage for the second quarter 2014 was 27.8%, compared to 26.9% in the second quarter 2013. Gross margin was driven by improved efficiency in the OEM Solutions segment, partially offset by a lower percentage of revenue from the Company’s higher margin Symmetry Surgical segment as compared to the same period last year. Second quarter gross margin also benefitted from a one-time supplier payment for the early cessation of New Wave distribution rights, along with product recall favorability of $0.1 million.
Sales, marketing, general and administrative expenses in the second quarter 2014 were $18.5 million, compared to $17.5 million in the same period last year. The increase in the second quarter 2014 was primarily due to $1.5 million in higher general and administrative expenses, partially offset by cost controls in sales and marketing expenses. The increase in general and administrative expenses was also due to increases of $0.9 million in transaction related costs, $0.7 million in stock based compensation expenses, and $0.2 million in amortization expense. This was partially offset by a decrease in specific healthcare related expenses as well as a net gain on insurance proceeds received of $0.2 million.
Operating loss for the second quarter 2014 was $(2.6) million, compared to $7.1 million in the second quarter 2013. Operating margin was (2.5)% in the second quarter 2014, compared to 7.2% in the same period last year. Excluding charges for asset impairment, stock compensation expense, amortization of intangible assets, and transaction related costs, as well as charges for facility closure and severance costs, product recall favorability, and net gain on insurance proceeds received (referred to collectively as “operating income adjustments”), operating income for the second quarter 2014 was $11.9 million, compared to $10.0 million in the same period last year. The increase was primarily driven by higher OEM Solutions gross margin, partially offset by higher operating expenses and lower revenue in the Symmetry Surgical segment.
Interest expense for the second quarter 2014 was $2.1 million, compared to interest expense of $4.6 million in the same period last year. This decrease was driven by the Company’s focus on using free cash flow to reduce debt and the amendment of the Company’s credit facility at the end of 2013, which allowed the Company to eliminate its higher rate mezzanine debt.
Income tax benefit for the second quarter 2014 was $1.9 million, compared to income tax expense of $0.6 million in the same period last year, due to the loss from continuing operations in the second quarter 2014 and income from continuing operations before income taxes in the second quarter 2013.
Net loss from continuing operations for the second quarter 2014 was $(6.6) million, or $(0.07) per diluted share, compared to income from continuing operations of $1.5 million, or $0.04 per diluted share, in the same period last year. Excluding the operating income adjustments noted above, as well as unrealized foreign currency impact on an intercompany loan, legal entity restructuring, amortization of debt issuance costs and loss on debt extinguishment, net income from continuing operations for the second quarter 2014 was $6.4 million, or $0.17 per diluted share, compared to $3.8 million, or $0.10 per diluted share in the same period last year.
The weighted average number of diluted shares outstanding during the second quarter of 2014 was 36,583,860.
Thomas J. Sullivan, President and Chief Executive Officer of Symmetry Medical, stated, “We achieved solid second quarter results, with increased revenue in all of our OEM solutions categories. We are pleased that the revenue growth and our efficiency initiatives, including the Symmetry Business System, contributed to improved gross margin. We achieved this despite a lower percentage of revenue from our higher margin Symmetry Surgical segment, which, neutralized for the loss of New Wave, experienced sequential growth in both the U.S. and International markets but was down year-over-year.”
Mr. Sullivan added, “This morning we announced a proposed transaction to sell our OEM Solutions business and concurrently transfer to Symmetry Medical, Inc.'s shareholders ownership in a new company holding our Symmetry Surgical business. We believe it will maximize shareholder value by providing a premium valuation for the OEM Solutions business along with the upside potential of Symmetry Surgical in the large global market for surgical instruments.”
Conference Call
Symmetry Medical will host a conference call to discuss second quarter 2014 financial results and the definitive agreement to sell its OEM Solutions business and concurrently transfer to Symmetry Medical, Inc.'s shareholders ownership in a new company holding its Symmetry Surgical business at 8:00 a.m. ET on August 4, 2014.A live webcast of the conference call will be available online from the investor relations page of the Company’s corporate website at www.symmetrymedical.com. The dial-in numbers are (800) 708-4540 for domestic callers and (847) 619-6397 for international. The reservation number for both is 37838715 (please reference “Zack Kubow” as host and “Symmetry Medical” as the Company).After the live webcast, the call will remain available on Symmetry Medical’s website through November 4, 2014. In addition, a telephonic replay of the call will be available until September 3, 2014. The replay numbers are (888) 843-7419 for domestic callers and (630) 652-3042 for international callers. Please use reservation code 3783 8715#.
About Symmetry Medical Inc.
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